Canada to apply GST/HST to short-term rentals booked online

https://thinkpol.ca/2020/12/01/airbnb-asked-canada-for-a-bailout-canada-slapped-airbnb-with-a-tax/

by 63labs • 6 years ago

97 127 6 years ago

arcticbull2• 6 years ago

One reason that short-term rentals have been cheaper than hotels is because hotels had to collect and pay sales tax while Airbnb didn’t.

Seems like this isn’t a new tax from out of nowhere to disadvantage Airbnb but rather a policy designed to bring Airbnb in line with their peers.

It reads like Airbnb was put at an artificial advantage as compared to hotels because hotels had to charge sales tax. Now everyone does. Seems fair to me. What seems unfair is that they weren’t subject to this the whole time. Honestly surprised it’s not retroactive.

esc_colon_q2• 6 years ago

Fixing a bad law is fine, but you can't propagate that back just because you wish you'd thought of the edge cases then. Or at least you shouldn't, if you have any sense of fair play...

arcticbull2• 6 years ago

In Canada ex post facto laws are prohibited in the charter of rights and freedoms for criminal matters only - and this isn’t an absolute prohibition either. They are permitted for civil matters.

It’s an interesting thought exercise, and fairness would in my sole opinion be based on whether they knew they should have been paying the whole time and were getting away with it. It won’t happen, though.

usrusr2• 6 years ago

Legislative changing laws, that should definitely not apply retroactively, even if sometimes this is very painful.

Executive fixing application of laws that haven't been applied correctly in the past however is an entirely different story. If laws oblige you to pay taxes you are obliged to pay wether they have been collected or not. Not much different from a crime being a crime wether you are caught or not. Unless of course there's also a law that states an equivalent of "taxes not collected within the first $n $timeunit are waived".

DanBC• 6 years ago

Tax law is a bit more complicated.

Tax law is what's written in statutes, but it's also how the courts interpret the law. This means there's stuff that's clearly lawful, stuff that's clearly unlawful, and then a grey area where reasonable people can interpret the law in different ways and we need the courts to rule.

This works well when you have cases that go to court. But some tax authorities prefer a light-touch or right-touch regulatory approach, and so they prefer to persuade people to pay tax that's owed and they leave court cases for the blatant offenders. That means we don't get the case law.

rootsudo2• 6 years ago

Ex post facto.

calyth2018• 6 years ago

I disagree.

What's being explicitly applied is the federal and provincial sales tax.

Airbnb and the hosts were selling a service without collecting the sales tax.

Someone was tax evading, and someone owes the CRA back taxes.

buran777• 6 years ago

was put at an artificial advantage as compared to

That makes up most of the "disruption" lately. Companies discover that they can exploit some legal loophole by claiming "but technology" and get an upper hand over classic competitors.

By the time they're forced to follow the same rules, or (less likely) the law is relaxed for everyone else, they already have a healthy head start and can either claim that they're being treated unfairly, or that they're better than everyone else.

AmericanChopper• 6 years ago

My reading of that article was that tax liability hasn’t changed at all. The Airbnb hosts were always liable for paying all of their taxes, including whatever sales taxes they were liable for. This change means that Airbnb are now responsible for collecting that sales tax and paying it to the government on behalf of their hosts.

Whatever opinion you have about that, it doesn’t seem to be addressing any sort of loophole. It’s not a new tax, it’s just a new regulation for collecting it.

throwaway2011037• 6 years ago

The biggest and most common "loophole" being "we don't need all the physical infrastructure"

Amazon: we don't need to own retail stores or inventory

Airbnb: we don't need to own hotel properties and employ managers and housekeepers

Uber: we don't need to own cars and employ drivers

Are there any examples of tech disruptors that are really displacing classic competitors only on the basis of tax loopholes?

jannes• 6 years ago

Didn't Amazon also avoid collecting sales tax in the US until recently? I think they didn't have to collect sales tax on any cross-state transactions (tax is owed at the point of delivery). Whereas brick and mortar stores almost never make transactions with their customers across state borders.

According to Wikipedia [0] they only had to collect sales tax in all states since 2017 after some "Amazon laws" were introduced? That sounds later than I expected.

[0] https://en.wikipedia.org/wiki/Amazon_tax

candu• 6 years ago

It reminds me a lot of the excesses of software patents, many of which in effect say "it does (insert mundane thing X)...BUT WITH MORE TECHNOLOGY".

jariel3• 6 years ago

It's just unbelievable to consider that Amazon, AirBnB etc. have been so successful due to tax irregularities, and of course, when at scale, they G and A can doe this via Dublin loopholes etc..

When bureaucrats are searching for ways to make money, and they always all, for god's sake why don't they go to the obvious places first?

We also have to consider how much our subsidized postal systems are really just subsidizing one form of business over another.

bawolff3• 6 years ago

We also have to consider how much our subsidized postal systems are really just subsidizing one form of business over another.

Canada post is not exactly subsidized: https://www.ctvnews.ca/mobile/business/canada-post-group-rep...

But even if it was, this is precisely the type of thing it makes sense to subsidize, since its a business that enables other businesses.

onemiketwelve2• 6 years ago

And a business that used to enable communication between residents, business, and government

jariel3• 6 years ago

1) Canada post is a crown corporation and is effectively subsidized [1]. It's existence is guaranteed, it effectively cannot go insolvent, as such it receives considerably better terms of business than otherwise. And more.

2) "its a business that enables other businesses"

Almost all businesses 'enable other businesses' - this is absolutely not a reason to subsidize package delivery.

In fact, it's the opposite of a reason.

If there is a reason, it's to ensure some kind of common mail delivery particularly to remote outposts.

[1] https://lfpress.com/opinion/columnists/canada-post-back-to-a....

pjc50• 6 years ago

He's probably referring to the international postage system which makes it cheaper to ship from China than in- country.

throw_m2393392• 6 years ago

When bureaucrats are searching for ways to make money, and they always all, for god's sake why don't they go to the obvious places first?

Because some of their friends also benefit from these loopholes, though at a smaller scale I imagine. The whole "stupidity/malice" addage has always been a euphemism for "corruption" in my book. There is an insane amount of potentially taxable money and a lot of states dearly need that money, especially right now.

We also have to consider how much our subsidized postal systems are really just subsidizing one form of business over another.

Yeah, but you could say that for roads as well, or any utility none of these businesses helped create and from which they profit. That's why taxation exists at first place. Imagine Amazon having to build/maintain their own roads to deliver parcels...

I'm a bit more lenient with Amazon from an ethical perspective. Airbnb, Uber and co, deliberatly violating local laws with their illegal taxis/hotels on the other hand, and the shear inability for governments to crackdown on these services... not because founders are geniuses, because VC money helps exploit justice systems. I can assure you that if I were to launch a bootstrapped Airbnb like service in my home country I'd be shut down in a week and probably jailed...

jariel3• 6 years ago

"Yeah, but you could say that for roads as well, or any utility"

No, roads are socialized, not subsidized.

We socialize them because it would be impossible otherwise - each road represents a kind of 'single access point'.

Package delivery - other than possibly ensuring packages are delivered to remote areas - does not need to be socialized, and probably not subsidized.

Farming - again, absolutely not socialized, because it would be absurd for our governments to be running all of our farms - but - there are strategic subsidies because 'on the whole' we want to make sure certain crop availability (and for other reasons).

We subsidize entertainment: want to make a movie in Canada? You get tax breaks.

There's no reason at all to allow for skimping out on VAT for most online services.

And FYO with respect to 'looking for tax loopholes' - don't discount the ineffectiveness of the bureaucracy. We are 10 months into a pandemic, and the PM of Canada, just 2 days ago, the PM of Canada was zooming with a Big Tech CEO about some cool ideas for 'Apps with Contact Tracing' and other things that they have absolutely made 0 progress on. Compared to places like Taiwan and S. Korea and their very active operational engagement of COVID, sometimes I wonder how the mail actually does get delivered.

indymike• 6 years ago

There is more to Airbnb's success than just a better deal than a room. Something that makes little sense is that a 200 room hotel, let alone the hotel industry, should be able to crush Airbnb on price in any local market. The Airbnb operator has little operational efficiency, aside marketing and IT (provided by Airbnb) in comparison. Taxation (my hometown taxes rooms at 17%) might be some of it, but it seems much larger than that.

OneGuy123• 6 years ago

A completely personal rant:

I was almost evicted since my landlord wanted to make more money with Airbnb. Before that I've already heard of cases how in tourists towns the local poorer population wasn't able to get long term apartments because richer tourists filled them through Airbnb.

Airbnb is cancer for the local population in any country that isn't very rich because locals & students then have to commute from further distances.

So banning Airbnb would be godsend for the local population of many countries, if you want to make money with renting open a hotel.

Obviously there is the argument "I own the apartment so I can do whatever I want". I really have no good counter argument for this as it is true. But all laws are really relative to the culture. This same person could then say "I don't owe the country any taxes because _I_ made the money".

So this just goes to show that we "normalize" everything based on laws.

For the greater good of the local population in poorer countries Airbnb should be banned.

onemiketwelve2• 6 years ago

The thing that sucks is that a lot of the publicised grievances are always with the demand side, and never the supply aka the home owners. Since they are richer or something, denying them side income or filling an empty room that would otherwise go unused is supposed to be a loss they should stomach, not to mention the savings/ better experience for the renter who doesn't want a hotel experience.

And yes, there are lots of serial property owners who run lots of homes on Airbnb but I really don't think regulation can be nuanced enough, at least what's been proposed.

freeone30002• 6 years ago

Since they are richer or something, denying them side income or filling an empty room that would otherwise go unused is supposed to be a loss they should stomach

Quite simply, yes. If this were all it was, nobody would have a problem. The issue is short-term rentals taking over reliable lease stock. Landlords can make more money with less downside renting out one weekend a month than an entire month, so why wouldn't they? So rental properties simply vanish from the market at key price points.

If everyone had a home that they owned, I would not have a problem with airbnb. But this is not the case, and we have no intention of making this the case, so as long as we have obligatory renters, we can't have this incentive.

bawolff3• 6 years ago

Personally i'd rather there just be more housing so the market can balance out.

Like in theory, all things being equal, long term rentals should be much better for the landlord. You don't have to worry about vaccines in the downtime, you dont have to clean/etc between tenants, you have less regulatory concerns (in theory), long term tenants have incentive to be respectful to neighbours and not destroy the place.

But there is just more demand for short term. Personally i would rather there was just more housing in general (maybe that's naive).

There are definitely some nice things about staying in an airbnb other than costs - having a full kitchen, having a bit more "room" [especially if travelling in a group], usually being in an area near things like grocery stores and less near generic tourism BS.

throw_m2393392• 6 years ago

Personally i'd rather there just be more housing so the market can balance out.

to build houses there is a need for a underlying infrastructure (roads, electric grids, gaz pipes, whatever...). Who's going to pay for all that when often existing ones are barely maintained?

Now cities could have more skyscrappers to house more people as well... but there is a lot of NIMBY involved as well, it's a complex subject.

I'm not opposed to Airbnb as long as they are subject to the exact same standards and laws as hotels, in dedicated buildings for instance. Obviously, very little hosts would want that.

Airbnb'ing an appartement can drastically affect the quality of life for neighbors as well.

esc_colon_q2• 6 years ago

If other people want to pay more for your place, why should that place's owner be forced to let you pay less than they could make with someone else?

Seriously. What is better about you, other than that it is you?

"Long-term is better for the community" may be an argument that I can get behind re: a tax, but that's not worth very much at all. Maybe a couple hundred a month in a good location? Less in a poor one.

They do own the fuckin apartment. They should be able to do whatever they want with it, within reason. Go pound dirt may be right.

usrusr2• 6 years ago

That's assuming that property rights are absolute. Maybe that is the case in your country, but that's definitely not true everywhere.

And it's not just countries that might have a hint of socialist nuance: even the USA wouldn't accept if you buy a ranch and then declare that on this property only the laws of the PRC apply (or that you declare it part of the UK). There are limits to what ownership allows you to do and those limits are very much subject to legislation.

srtjstjsj2• 6 years ago

Owning real estate on this finite planet is a privilege granted by the community, not an inaliaenable human right.

Rebelgecko• 6 years ago

Living next to an Airbnb sucks. In certain cases, our laws put the good of the community ahead of an individual's potential profits.

x87678r• 6 years ago

They do own the fuckin apartment. They should be able to do whatever they want with it

I live in a condo building where there is a HOA rule where leases of less than 12 months are forbidden. I'd never live in a building where AirBnBs were allowed. Similarly cities can ban or severely regulate short term leases if they want.

0x262d4• 6 years ago

Yeah, it turns out that property rights come into conflict with human rights a lot, and this is why property rights should not be fundamental.

The people in responses saying owners "should" be able to do anything with stuff they own - well, the owners of property certainly think so. What about the majority of the population? I expect people's opinions about this will change rapidly, in a radical left direction, when the COVID eviction and foreclosure wave hits the US.

srtjstjsj2• 6 years ago

Alternatively, the problem with property rights is that some humans don't have property, not that some humans do have property.

fergie2• 6 years ago

I have a good friend who is a Law Professor and we had a pub conversation about the concept of "property ownership" a few years ago.

It was really mind blowing- I had never really thought about how abstract the notion of property ownership actually is, especially when you factor in inheritance. We should definitely be more critical of political systems that seek to justify concentrating property in the hands of the few.

odiroot• 6 years ago

and this is why property rights should not be fundamental.

No thank you, sir. I was born in a country, where that was the case.

This system has failed in my country and in many others like mine. Let us hope we never try this again.

abdullahkhalids• 6 years ago

If you think of it as a You vs Landlord negotiation, indeed, the landlord is permitted to do whatever he wants such as not renting to you because he has a better offer elsewhere.

If you think of it as Society vs Landlord, there are many reasons that Society can give to justify preventing the Landlord from Airbnbing. Such as, society has a duty to provide housing to locals, airbnb guests make residential areas more dangerous, dirtier and noisier, other standard reasons why businesses are not permitted in residential areas.

If these reasons trump the positive impact on the region from encouraging tourism, then, regulating airbnb makes sense.

jraby3• 6 years ago

I think it’s more complicated than that. While it does lead to higher rents, it also leads to more visitors and tourists who spend more at local establishments. Those places hire local people.

So there is an argument to be made that it helps with jobs, higher pay, and retail establishments in the area as well.

Ekaros3• 6 years ago

How much greater the tourist spending is versus the spending from locals? Which were displaced. As those displaced locals won't be spending money any more at local businesses.

someelephant• 6 years ago

This does appear to be a good argument on face however it's not guaranteed that tourists do in fact spend more at local establishments. Furthermore, is an economy boosted by tourism stronger or are there just a lot of low wage jobs available? These kinds of questions should be answered by rigorous study not economists or travel lobbyists.

hamandcheese• 6 years ago

Obviously there is the argument "I own the apartment so I can do whatever I want"

I mean, zoning is a thing, right?

arcosdev• 6 years ago

Even though I've used Airbnb. I have to agree with you.

acd10j• 6 years ago

I can see no mention in article of Airbnb asking for a bailout in Canada and in turn Canada slapping a tax.

mattmanser• 6 years ago

Penultimate paragraph. Likely an editor sensationalized the title, as you're right, it's not the focus of the article.

mgbmtl• 6 years ago

AirBNB asked for a bailout back in March 2020. The blog post makes it sound like there was a cause and effect, but this is just the government normalizing things across the country.

Here are more official sources on the news:

https://www.cbc.ca/news/politics/economic-update-child-care-...

https://www.thestar.com/business/2020/11/30/ottawa-to-impose...

Sanzig2• 6 years ago

I think (well, I hope) that Airbnb understood that request would go nowhere. Airbnb is politically radioactive in Canada, any government percieved as "bailing out" Airbnb would likely suffer consequences at the ballot box.

I suspect Airbnb instead made the request to placate underwater hosts during the start of the COVID tourism crash - they had to be seen as doing something.

Still an incredibly scuzzy and tone-deaf ask, but put in context, I sort of get why they did it.

f6v• 6 years ago

The audacity of asking for a bailout while planning the IPO.

eschulz• 6 years ago

Very audacious. Looks like their approach was to illustrate the financial difficulties of the Canadian hosts and ask the government of Canada to help those people out. Classic situation where the lion's share of the financial risk is held by thousands of individuals instead of the central company, and this is probably what also let them avoid certain taxes in the first place.

63labs2• 6 years ago

How did the title of the HN post change? I originally posted "Airbnb asked Canada for a bailout. Canada slapped Airbnb with a tax." It's now "Canada to apply GST/HST to short-term rentals booked online"

mynegation• 6 years ago

Probably changed by a moderator because they considered original one clickbaity. About new title: as a Canadian I am well aware what GST/HST is but might be worth changing back to the generic “sales tax”.

63labs2• 6 years ago

Interesting... I didn't know they did that.

janeroe• 6 years ago

What is this thread, a branch of /r/LateStageCapitalism? People, who are not aware that the questions they raise were answered centuries ago, are philosophastering about their "solutions".

burke• 6 years ago

In Canada, businesses are exempt from collecting GST/HST if the business makes under $X per year. This feels sensible and reduces paperwork and things to think about when starting up, but is a clear example of how AirBnB was skirting the rules by treating each renter as a business. They should have been collecting GST/HST from the start at the platform level.

randlet• 6 years ago

$X is $30,000CAD FWIW. The exemption is helpful for getting off the ground as it's one less thing to think about, even though in reality charging (and filing) GST/HST is not very onerous.

mattbee3• 6 years ago

In the UK they already add VAT to their commission fees, which is what Airbnb is "selling" e.g. if you pay £100 for a stay in a UK-based short let, Airbnb's fee on that might be £15, of which £12.50 is their fee, and £3 is 20% VAT. £85 is held in trust for the host, and passed on direct.

So Airbnb's income on that transaction is £12.50, not £100.

Hosts do sell their properties on multiple platforms, and their income determines whether they have to register for VAT. In Canada it's apparently $30,000 per quarter, in the UK it's about £85,000 per year. So lots of Airbnb hosts don't currently have to pay VAT.

sleepysysadmin• 6 years ago

Canada still hasn't put out a budget. Their "Fall economic update" explains why there is no budget. Their deficit is $381 billion. Yet they are talking about socialized childcare?

To be clear, Canada's total debt that built up since the 1980s is ~$750 billion. In 2020 alone the deficit of an equivalent of 20-30 years of government debt.

Who is to pay for all this spending? Well it's simple. We can look to our largest industries. Mining/Oil/Gas is actively being harmed and can't even afford themselves. Manufacturing was destroyed by christia freeland. Government taxes destroyed bombardier which is now being sold off. Little to airbus, little to alstom.

So we know exactly who is left in Canada to pay the bills. FIRE. Finance, Insurance, and Real Estate.

Finance are the ones who get to handle and manage the debt. So let's be realistic, Insurance and real estate left. Oh right, record low interest rates, possibly going negative. Real estate is being propped up by the government trying to prevent explosion.

I guess Insurance will be the one holding the entire debt?

cmrdporcupine• 6 years ago

Some context:

"Today [2018], per-capita Canadian federal debt is equal to US$13,588.51. In the U.S., the same figure is nearly five times higher at $67,000 per American."

Source, the not-very-left-wing National Post: https://nationalpost.com/news/the-utterly-unbelievable-scale...

maxerickson• 6 years ago

Governments don't need to pay off debt. At least not until they crash their currency, but that already makes the debt go away.

v77• 6 years ago

The bigger news from this budget update is that Netflix/Prime avoided a 'Cancon tax', where they would be forced to make more Canadian content for the services, funded by an added levy on consumers in the country. We dodged a bullet there, I certainly don't mind these changes.

bregma2• 6 years ago

I'm old enough to remember when CanCon was brought in to broadcast TV and radio. Lots of business owners whined loudly about having to not import cheap second-hand culture from foreign places and how it cut in to their personal wealth generation capacity. There was a bit of a rough transition (cough Beachcombers cough) but eventually the investment paid off with interest.

I wouldn't resent a cultural development fee. It helps maintain a virtual wall across the southern border to protect our delicate assets.

dblohm73• 6 years ago

Is it really effective across all media? Canadian radio is awful IMHO because of CanCon rules: there aren’t enough Canadian artists within a specific radio genre to saturate a station’s quota, so in many cases we end up hearing the same artists repeatedly throughout any given day.

908B64B1972• 6 years ago

To me it sounds a little ridiculous to have the taxpayer subsidize... entertainment.

I mean, it's one of the most lucrative business on earth. If Canadian content producers want people to watch their content they should just... make things that people want to watch? Worked fine for pretty much evert major studio out there.

mattbee3• 6 years ago

Canada still has an exemption for small suppliers not to pay sales tax, so this provides a strong incentive for those to find ways to take bookings outside of Airbnb.

Does an owner-operated web site count as a "digital platform"? What about a centralised telephone booking service?

Or does it just mean "anything that's big enough to be targeted as one entity by government"?

It seems clumsy to tax the booking method rather than the supply itself, but maybe it's a matter of practicality for tax collectors.

ryanbrunner• 6 years ago

I don't think this is such a bad thing. If AirBnB's role of the relationship isn't worth the premium you pay to cover taxes, that's a pretty strong argument that AirBnB isn't really providing much value and we'd be better off without a middleman in this relationship (I think for what it's worth that this probably isn't true, and people will happily pay 5-15% to be able to deal directly with AirBnB)

mattbee3• 6 years ago

Airbnb already charge VAT (in the UK at least) on the host service fees, i.e. the 15% of the transaction they keep for themselves.

So Airbnb already charge for their service, and they're taxed on it.

What's new is taking GST (or VAT) on the accommodation too, which is normally paid over to hosts direct, and who have to remit VAT only if they were over the "small trader" threshold (in the UK that is not many).

xutopia• 6 years ago

I benefited from AirBnB and I am glad this is in place. Now hotels have no excuses but to offer better services or better price.

hasuej• 6 years ago

Yep, this is great for AirBNB hosts. It legitimizes the service and gives people a predictable/regulated way to run their rentals.

Canada to apply GST/HST to short-term rentals booked online

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